The UK Government recently launched a consultation on further reforms to public procurement. The consultation follows on from the publication of the UK’s Industrial Strategy and outlines proposed changes to procurement law aimed at growing British industry, jobs and skills. The proposals are grouped into three main areas:
- supporting small businesses and social enterprises;
- supporting national capability; and
- supporting good quality local jobs and skills.
Key proposals
One of the most significant proposals is that ministers would be permitted to specify certain goods, services or works as critical to the UK’s national economic security. Ministers could then direct contracting authorities to take the critical nature of services into account when conducting procurements, potentially excluding those competitions from the scope of procurement law.
Other key proposals in the consultation are that contracting authorities would have to:
- for procurements of over GBP5 million, include at least one award criterion relating to the bidder’s contribution to jobs, opportunities and skills. The criterion must have a minimum weighting of 10%;
- take a standardised approach to assessing social value and allocate a 10% social value weighting in tenders for contracts valued at more than GBP5 million;
- publish at least one social value KPI relating to jobs, opportunities and skills (again for contracts valued at over GBP5 million);
- set 3-year targets for increasing direct spend with small and medium-sized enterprises (SMEs) and voluntary, community and social enterprises (VCSEs). This only applies to ‘large’ contracting authorities with a procurement spend over GBP100 million;
- exclude suppliers who cannot demonstrate prompt payment of invoices from bidding for contracts valued at more than GBP5 million; and
- conduct and publish a public interest test to determine if any proposed outsourcing of services could be more effectively delivered in-house. This applies to contracts of over GBP5 million.
Analysis
It is interesting to note that Government is not consulting on the proposals in respect of national security and critical services and products, which indicates that a decision to implement this change may have already been made.
If the scope of these critical services and products align to the eight growth-driving sectors identified in the Industrial Strategy, there could be scope for ministers to direct that, for procurements relating to certain activities in these sectors, use of the national security exemption should be considered, potentially allowing direct contracting with a trusted supplier without a competitive bidding process.
Defence is one growth-driving sector which currently benefits from national security exemptions. It seems possible that, depending on how expansively the Government specifies the scope of goods, services critical to economic security, the proposals could introduce similar measures for other key sectors. This potentially opens the door to a “buy British” strategy justified on the grounds of national security. This continues the approach increasingly adopted by the Government of bringing economic security and critical industries within the scope of national security.
On social value, the proposals would effectively impose a single approach on all contracting authorities, with an emphasis on job creation, opportunities and skills and all contracting authorities being required to implement a single social value tool. This would have the advantage of standardising practice across contracting authorities, providing greater certainty to the market, but may come at the cost of stifling more innovative approaches.
Contracting authorities would have some flexibility under the proposals and could specify the geographical location in which social value would be delivered – the contracting authority’s area of responsibility, the location where the contract would be performed, or the supplier’s location. Depending on what approaches contracting authorities take, this could pose challenges for suppliers that do not have national operations or, conversely, deliver services remotely.
Social value would be tracked through to delivery and the publication of at least one social value KPI relating to jobs, opportunities and skills commitments means that suppliers may be at risk of suffering the consequences of poor performance under the Procurement Act if they fail to deliver on their commitments.
What happens next
The consultation remains open until 5 September 2025. Whether you are new to public contracts or have built your business around them, the consultation is an important opportunity to help shape the UK’s economic growth ambitions.
DLA Piper has a cross-discipline and cross-sector team ready to assist with drafting and shaping responses to the consultation, with specialists in procurement and public law experienced in advising bidders.
Please contact our team if you would like to discuss the consultation further.